Partnership Agreements

We are specialist partnership solicitors

We draft and negotiate partnership agreements and solve problems arising under partnership agreements. We work for both partners or partnerships alike, offering a high level of expertise whether you are joining, managing or leaving the partnership.

Please do call us to discuss your query. We will always scope any work and provide an estimate giving you clarity on the likely path and legal fee costs.

We are able to offer meetings or telephone conference calls at relatively short notice at our Central London offices. Our service will include guidance on:

Are the terms offered reasonable and in line with our experience of the market?;

Are the restrictive covenants likely to be enforceable and what will be there impact on future activities?;

How easily can you be expelled and the consequences?;

We interpret the provisions dealing with allocations of income and capital and likely taxation position;

Any other matter which is of concern.

We draft and negotiate on behalf of partners and will provide fee estimates if you are interested in this added service.

Restrictions on partners activities

We often see that a partnership agreement never quite covers the problem we are solving. Restrictive covenants are notoriously difficult to draft and date quickly. A typical restrictive covenant found in a partnership agreement will deal with:

Working for a rival within a specified geographical area.

Soliciting or canvassing clients, customers, or suppliers.

Soliciting or employing other partners and staff.

There may also be restrictions which seek to prevent team moves by stating that for a specified period following departure a member cannot join a firm to which another member from the original firm has recently transferred. Such provisions have not yet been tested in the courts, but are used to prevent multiple departures, predominantly relied on by professional service firms where the clients are the business.

Silence in the partnership agreement

The main difficulties arise when nothing has been documented or the wording is not clear. Surprisingly often the case. Where the partnership agreement is silent the starting point for construing all post-termination restrictions and covenants, is that they are void on the grounds of public policy unless they are:

Reasonable in the interests of the parties.

Reasonable in the interests of the public.

Necessary to protect a legitimate business interest such as trade secrets or business connections.

Go no further than is reasonably necessary between the parties to protect that interest.

Restrictive covenants in employment contracts are often open to challenge because of the inherent inequality between the bargaining position of the employee and employer. The position of partners is different. The courts consider that there is no imbalance in bargaining power between members of a partnership or an LLP.

Restrictive covenants will not be implied

There is no fiduciary relationship between the partner and the partnership or the member and the LLP once the partner leaves. That means if there are no contractual and enforceable restrictive covenants a departing partner is free to take with him clients, staff and trade secrets.

Garden leave

A garden leave clause in a partnership agreement may suspend the right of departing members during their notice periods. Garden leave clauses typically restrict matters such as attending the office, undertaking client work, participating in marketing activities, attending partners’ meetings, retaining senior management functions and speaking to clients and staff about their departure.

No implied term

In the absence of an express right to do so, the general view is that it is not possible to place a partner on garden leave as, either directly or indirectly, their profit share will be affected by his ability to work.

ached. An undertaking presents an opportunity to re-negotiate the restrictive covenants, post partnership liabilities and offer a new opportunity to protect trade secrets.

Employment law aspects of partnership contracts

Compulsory retirement is not always discriminatory. The position is clearer if there is a written partnership or LLP agreement setting out the retirement date.

Partnerships are exposed if they do not have policies in place – we do review and tailor for the particular firm.

Gannons were really helpful with my claim for employment rights when I was dismissed from a partnership. I got the result I needed thanks to their well structured arguments.

Gannons paid particular attention to restrictive covenants when drafting our partnership agreement. They appreciated the unstable nature of our industry and the need to protect the business when partners leave.

Gannons is the trading name for Gannons Commercial Law Limited. Registered in England and Wales with company number 08914222. Authorised and regulated by the Solicitors Regulation Authority with SRA number 612616. Registered office at 20-21 Jockey Fields, London WC1R 4BW. Privacy Policy